{"id":3804,"date":"2015-12-08T22:13:27","date_gmt":"2015-12-09T03:13:27","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/mobileye-drivien-by-focus\/"},"modified":"2015-12-08T22:13:27","modified_gmt":"2015-12-09T03:13:27","slug":"mobileye-a-focused-drive","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/mobileye-a-focused-drive\/","title":{"rendered":"Mobileye: A Focused Drive"},"content":{"rendered":"

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Mobileye is an Israeli technology company whose \u201cEyeQ\u201d system-on-chip product prevents vehicle accidents by detecting possible dangers and giving warning signals to drivers. 1<\/sup> The company\u2019s IPO in July 2014 raised $890 million at a valuation of $7.6 billion, and its share price has since increased by 15%. 2<\/sup><\/p>\n

Mobileye develops software algorithms collectively termed \u201cAdvanced Driver Assistance Systems\u201d (ADAS) which detect different types of dangers, including lane departure, crossing pedestrians, and high speed. The system\u00a0triggers a warning alert and will even takes corrective action:\u00a0the company has been making the news recently because by 2016 Mobileye expects to launch software enabling fully autonomous vehicle driving in partnership with Tesla.\u00a03, 4\u00a0<\/sup><\/p>\n

\"Source:
The Mobileye system at work<\/figcaption><\/figure>\n

What Mobileye does\u2026 and what it doesn\u2019t <\/strong><\/p>\n

Mobileye\u2019s operations are focused on one thing and one thing only: developing innovative ADAS software. In fact, in 2014 343 out its 473 employees were R&D staff, with the\u00a0company investing 33% of its revenues ($47 million) on software development. 5<\/sup> In contrast, Mobileye partners on almost all other activities required to deliver value: STMicroelectronics manufactures all of its chips 6<\/sup>; producers of vehicle components (“Tier 1s”) such as Gentex and Magma manufacture the monocular cameras on which the \u201cEyeQ\u201d chip is installed and from which\u00a0it receives data 7<\/sup>; and OEMs integrate the camera and chip system into vehicles.<\/p>\n

What Mobileye does do is work very closely in partnership with its stakeholders. For example, it works with Tier 1s to ensure their camera designs are compatible with its technology, works on their bids for OEM business, and develops technology in response to OEM requests. Additionally, it often goes in front of regulators to ensure its technology meets upcoming requirements. 8<\/span><\/p>\n

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Creating Value<\/strong><\/p>\n

Mobileye\u2019s business model creates value for many players. Ultimately, its product makes driving safer and easier for consumers. This is good for OEMs, who can sell their cars at a premium to individuals who value improved safety and ease-of-use; for owners of car fleets whose cars undergo fewer accidents; and for insurance companies that suffer lower claims if the cars they insure have Mobileye technology. Additionally, Tier 1 and OEM partners receive value by receiving a competitive advantage against rivals.<\/p>\n

And of course, we shouldn\u2019t forget the benefit to the wider public: as a pedestrian or driver, I\u2019m safer if there are more users of Mobileye on the road.<\/p>\n

At present Mobileye captures some of this value by charging Tier 1\u2019s for using its technology, at a fixed price per chip, gradated by the level of software included. However, by helping the Tier 1s on their bids to OEMs, Mobileye\u00a0also drives a higher price for the Tier 1 which\u00a0in turn creates\u00a0more value for itself.\u00a07<\/sup><\/p>\n

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Alignment of Models<\/strong><\/p>\n

Mobileye\u2019s operating and business models feature a number of interesting alignments:<\/p>\n